Revised NAFTA agreement a relief to Canada’s beef producers

Image Credit: KCL Cattle Company Ltd.

After more than a year of negotiations, Canada, the U.S. and Mexico have reached an agreement on NAFTA. The new, proposed agreement is called the U.S.-Mexico-Canada Trade Agreement (USMCA).

The agreement is good news for Canadian beef producers, as it preserves the duty-free trade in live cattle and beef, which has benefited all three partners under NAFTA. The existing rules of origin and the mechanisms for fair dispute settlement also remain intact.

Brian Innes, president of the Canadian Agri-Food Trade Alliance (CAFTA) issued a statement on the new agreement: “We welcome an agreement to renew NAFTA. Free and fair trade has made our agri-food exporters globally competitive. We’re very pleased that free and fair trade of North American agri-food products will continue.”

The U.S. is Canada’s largest trade partner for beef and live cattle, and the new agreement ensures that will continue. “USMCA gives the Canadian beef industry critically important ongoing access to our largest markets: U.S. and Mexico,” said Bryan Walton, ACFA’s president and CEO. “This is an integrated industry here in Canada and free trade in North America benefits producers in all three countries.”

Why diversification still matters

The uncertainty over NAFTA has been trying for Canada’s beef producers, and it has highlighted the need for Canada to expand its global reach and forge new trading partnerships.

Trade with Asia recently received a boost with the signing of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). Speedy ratification of this deal is of the essence for Canadian producers to ensure Canada is on the ground floor when it comes to securing lower tariffs with other partners. 

Europe is another market that provides export opportunities to Canadian beef producers. The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is designed to encourage free trade between Canada and Europe, although Canada doesn’t currently fill its quota for beef exports because there are not enough Canadian packing plants qualified to send beef to Europe.

“The most important thing that we got out of reaching this USMCA agreement is we’ve removed most of the cloud of uncertainty that was hanging over the Canadian economy and discouraging investors from moving forward,” said John Weekes, former chief negotiator for NAFTA.

The pursuit of an ambitious international trade agenda is one of the key tenets of Canada’s National Beef Strategy, which is designed to ensure that Canada’s beef producers are positioned to weather challenges and take advantage of opportunities. You can read more about that in ‘4 reasons the National Beef Strategy is important to Canada’.

Why free North American trade is good for the beef industry and Canada

Since the inception of the North American Free Trade Agreement (NAFTA), in 1994, the beef industries of Canada, U.S. and Mexico have essentially been operating in one single, North American market. In fact, the beef industry is a good example of how the original design and intent behind NAFTA has been successfully accomplished.

In this integrated market, processed beef (fresh, chilled and frozen), as well as live cattle, move across the border relatively unimpeded and entirely tariff-free. The U.S. is Canada’s largest export customer for beef, and Canada’s single largest import supplier.

Did you know?
In 2016, Canada exported 270,00 metric tonnes of beef (75 per cent of our total beef exports) to the U.S. In the same year, 63 per cent of Canada’s beef imports (186,000 metric tonnes) came from the U.S. That same year, Canada also exported 765,395 head of live cattle, primarily to the U.S. The U.S. exported 30,291 head of live cattle to Canada.

 

Why an integrated market benefits beef producers on both sides of the border

Free and open trade between Canada and the U.S. has had two significant benefits.

First, the trade in live cattle and beef products ensure that both countries have a source of supply to meet the demand within their own domestic markets. A steady, and sufficient supply of cattle is critical to the efficient operation of feedlots and beef-packing plants.

Second, the vigorous and dynamic trade in live cattle and beef products has injected a healthy dose of competition into the beef industry on both sides of the border. This has resulted in a more efficient, productive industry that is highly competitive in the global beef market. For example, beef from Canada and the U.S. is proving attractive in the Asia Pacific marketplace, despite the geographical advantages of competitive beef exporters such as Australia and New Zealand. This is because of our ability to compete on quality and price.

The way forward for the integrated market.

Cattle producers on both sides of the border are well aware of the benefits of free and open trade. The National Cattle Feeders’ Association (NCFA) has been working with counterparts in the U.S., such as the Texas Cattle Feeders’ Association (TCFA), the National Cattlemen’s Beef Association (NCBA), and the North American Meat Institute (NAMI) to address any issues that could be an impediment to the continuation of NAFTA.

One such issue concerns the maintenance of a regulatory regime that provides essential safeguards for animal health and disease prevention without imposing unnecessary economic costs or barriers to trade. The right regulatory balance is crucial.

In an upcoming blog post we will write about a set of reforms to Canadian Food Inspection Agency (CFIA) regulations that will make importing and exporting live cattle easier, less time consuming, and less costly – helping to remove impediments to trade, smooth the border, and speed the pace of commerce. Stay tuned.

5 priorities for cattle feeders in 2019 

Canada’s cattle feeders are urging politicians to consider the needs of beef producers in their platforms for the 2019 federal election. 

Agriculture and Agri-Food is a $100-billion industry that employs more than two million Canadians. The government has identified the sector as one of a few with the potential to spur economic growth.

Canada is in a prime position to benefit from increasing global demand for agricultural products, but the industry requires government support in removing constraints and barriers to growth. 

The National Cattle Feeders’ Association (NCFA) cites five urgent challenges:

Rural infrastructure

Most agricultural operations are in rural municipalities with a limited tax base to provide infrastructure. With little federal funding, some municipalities have implemented counterproductive measures, such as the livestock head tax in Lethbridge County. This is eroding the competitiveness of cattle feeding in southern Alberta.

It is crucial that the federal government identifies critical infrastructure investments in rural communities and dedicates financial resources to make them happen.

Labour shortage

A chronic labour shortage of about 60,000 workers is costing primary agriculture producers about $1.5 billion in unrealized farm cash receipts each year. 

Farmers have been forced to turn to the Temporary Foreign Worker Program to fill positions that cannot be filled by Canadians, but the process is expensive, time-consuming and complicated. 

The program’s processes need to be streamlined and clear a pathway set for permanent residency for temporary foreign workers.

Regulatory barriers

The industry is ever-evolving with new technologies and industry developments. But when regulations don’t keep pace, it hinders our ability to compete in the global marketplace.

In 2016, NCFA released a detailed study entitled The Competitiveness of the Canadian Cattle Feeding Sector: Regulatory and Policy Issues(PDF)

, Costs and Opportunities. It highlighted six areas – enhanced traceability, export regulation and impediments, veterinary drug harmonization, inspection practices, transportation and labour – where reforms could generate an additional $495 million in revenue across the beef value chain.

International market access

Canada exports 45 per cent of its beef production, and those exports are primarily to the U.S. To grow, the industry needs to expand into other markets, including the Asia-Pacific region and Europe.

Agreements such as the North American Free Trade Agreement (NAFTA), the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the Canada-EU Comprehensive and Economic Trade Agreement (CETA) should be a government priority. They will have a tremendous impact on our ability to trade effectively with these regions.

Consumer education and trust

Government and industry need to work together to ensure consumers are able to make informed choices when it comes to their food, whether the issue is environmental impact, health, or production methods.

Public education should be a pillar of any new national food policy, and Canada Food Guide revisions should reflect the most recent scientific, medical and nutritional research.

In an earlier blog post, we featured John Weekes, an independent business advisor who has worked with NCFA on international trade issues. You can learn more about his work in Meet the international trade expert who is helping support the beef industry abroad.

How funding for the New Era Beef Industry will benefit all beef producers

This fall, Alberta’s beef producers will vote in a province-wide plebiscite on the industry’s checkoff program. The issue at hand is whether the refundable payment should become non-refundable.

Why the checkoff is currently refundable

The beef industry checkoff has been around since 1969 as a levy paid to the Alberta Cattle Commission (later to become Alberta Beef Producers, ABP). Funds from the levy were used for industry research and marketing, but it was somewhat contentious from the start. In 2009, the Alberta government passed a bill making the checkoff payment refundable – meaning that producers were able to apply for full reimbursement.  

Why a change to the non-refundable checkoff makes sense

Despite these early challenges, ACFA believes the associations and organizations representing different sectors of the beef industry production chain must join together and work for the benefit of the entire industry.

In 2017, the Alberta Cattle Feeders’ Association and ABP reached an agreement founded on their shared belief in collaboration and mutual support between different beef production sectors. The New Era Beef Industry (NEBI) is the result of that agreement, and it heralds a return to a mandatory beef cattle checkoff, with revenues to be shared by ABP, ACFA and a new Alberta Beef Industry Development Fund (ABIDF).

The ABIDF will provide project funding for market development, research, education, consumer advocacy and industry collaboration, for a stronger, more profitable beef industry. The fund will be governed by a council comprised of three representatives selected by ABP and three selected by ACFA. The six council members will select a chair who is not a member of the board or of either organization.

ABIDF will help compensate for the loss of the Alberta Meat and Livestock Agency, which provided funds for industry development until it was shut down by the government in 2016.

Under the New Era Beef Industry, the total checkoff payment will be $2 per head of cattle. It will be distributed like this:

  • 5 cents to the remitters of the checkoff 
  • $1.30 to ABP 
  • 25 cents to ACFA 
  • 40 cents to the Alberta Beef Industry Development Fund (ABIDF)

If the plebiscite in the fall results in a vote for the refundable checkoff, ABP will continue to collect the mandatory checkoff, and producers can still request a full refund if they wish. If the plebiscite results in a vote for NEBI, it will provide a unique opportunity for crucial industry research and development.

The checkoff was just one of the issues that new ACFA board chair, Ryan Kasko flagged as important to cattle feeders this year. You can read about the other issues in ‘Finances are among cattle feeders’ top issues’. 

How protectionist policies for dairy and poultry could harm Canada’s beef producers 

As NAFTA negotiations continue, Canada’s 60,000 beef producers are anxious to see a continuation of free and open trade within North America. Mexico and the U.S. currently import 80 per cent of our beef, and any impediment to that trade would severely impact the industry.

Ironically, North American trade for our beef is in jeopardy due to a Canadian protectionist policy involving a different sector. Supply management agreements protecting dairy and poultry producers are a source of serious contention in the negotiations.

What is supply management?

Supply management is a system whereby production quotas and import restrictions in the form of tariffs limit the availability of dairy, poultry and eggs. This helps keep prices at an artificially inflated level. 

Critics of the system argue that the system eliminates competition and raises prices for the consumer.

“The two planks of the system are quotas (producers need to purchase a licence to produce these commodities) and tariffs (taxes for incoming imports),” said Casey Vander Ploeg, vice-president of the Alberta Cattle Feeders’ Association (ACFA). “Both planks are needed to make the system work.” 

Why beef producers could be negatively impacted by dairy and poultry supply management

President Trump’s complaint with the supply management system is that it negatively impacts the ability of U.S. dairy, poultry and egg producers to export to Canada. To date, this has been a serious stumbling block in the negotiations, and officials are insisting that Canada dismantle the system.

Many of Canada’s beef producers are concerned that the supply management system protects a sector representing only seven per cent of our agricultural output, while putting the majority of Canadian agricultural exports at risk.

The role of the federal government in building agri-trade

The federal government has set a goal of reaching $75 billion in agriculture exports by 2025. “To achieve that goal, government needs to help us make our agriculture and agri-food products as competitive as possible within the international marketplace,” said Casey. “It’s important that supply management does not impede our ability to access those markets.”  

For a full explanation of why NAFTA matters to Canada’s beef producers, read ‘Cattle feeders head to Ottawa to support NAFTA negotiations’.

4 reasons the National Beef Strategy is important to Canada

These are interesting times in the beef industry. Our producers face numerous challenges such as declining cattle numbers across the world and consumer concerns about environmental impacts and animal welfare. At the same time, new markets, including those in Asia and the Pacific region, are providing opportunities for industry expansion.

To ensure Canada’s beef producers are positioned to make the most of these opportunities — and overcome the challenges — industry organizations, including the National Cattle Feeders’ Association, came together to develop a National Beef Strategy. 

The goal of the strategy is to position Canadian beef producers for greater profitability and growth and to support their reputation for superior quality, safety, value, innovation and sustainable production methods.

The National Beef Strategy is based on four main pillars and goals:

#1 Beef Demand

To increase the value generated from each animal by 15 per cent. Recommendations include:

  • Product development and the use of under-valued cuts to maximize competitiveness
  • Building recognition and loyalty for the Canadian Beef Advantage brand
  • Pursuit of an ambitious international trade agenda
  • Increasing consumer confidence in food safety, quality and production practices
  • Communication of the sustainability message

 

#2 Competitiveness

To reduce cost disadvantages compared to main competitors by seven per cent:

  • Working with regulators to develop a supportive regulatory environment
  • Improving access to affordable resources such as skilled labour, animal health products, feed grains and forages and new technologies
  • Maintaining and enhancing research capacity
  • Continuous improvement in sustainability and efficient use of resources

 

#3 Productivity

To increase production efficiencies by 15 per cent through improvements in the following:

  • Genetic selection
  • Research and development
  • Enhanced information flow along the production chain through information technology and verification

 

#4 Connectivity

To improve communication within the industry and connect positively with consumers, the public, government and partner industries through:

  • Development of an industry communication strategy
  • Engagement with industry partners and stakeholders
  • Engagement with government, consumers, domestic and international organizations

 

“This strategy is something all stakeholders in the industry can buy into,” said Martin Unrau, co-chair of the National Beef Strategic Planning Group. “There’s strength in numbers and by working together we will build a stronger and more robust industry capable of meeting and responding to the opportunities now and into the future.”

You can read more about some of the challenges facing cattle feeders in ‘Pressing cattle feeders issues discussed with politicians during Ottawa trip’.

Ottawa meetings bring cattle feeder issues to government’s attention

Each year, at its February board meeting, the National Cattle Feeders’ Association (NCFA) creates an Ottawa Engagement Strategy. This strategy provides a framework for four separate meetings in March, May, September, and November with federal decision makers, including MPs, ministers, parliamentary secretaries, staff, and house committees.

The strategy allows NCFA representatives to advocate for cattle feeders across Canada on major issues such as trade, regulations, labour, and infrastructure.

During the 2018 March and May meetings, the NCFA met with Patty Hajdu, Minister of Employment, Workforce Development and Labour, and with Lawrence MacAulay, Minister of Agriculture and Agri-Food, as well as more than 50 MPs and government officials.

The issues explained

The major opportunities and challenges that form the focus of this year’s meetings include the following:

Opportunities for growth

Barriers to growth

  • Consumer education and trust – To get the government engaged in consumer education, helping ensure, through the Canadian Food Policy, that consumer choice is “informed”, based on facts and science.
  • Labour shortages – To ensure that Canada’s agricultural producers and meat processors have access to the labour they need.
  • Rural infrastructure – To facilitate infrastructure development so that agriculture ties into broader provincial, regional, and national networks.
  • Regulatory barriers – To continue updating regulations so they reflect the day-to-day realities of beef production and keep pace with technological changes and ongoing innovations.

Progress made during the consultations

In early May, Rodger Cuzner, parliamentary secretary for labour, chaired a day-long roundtable on labour needs in agriculture and agri-food. It was announced that the government will no longer require separate Labour Market Impact Assessments (LMIAs) for worker transfers or replacement workers. This removes one of the many Temporary Foreign Worker Program (TFWP) complexities.

Bureaucrats administering the TFWP are currently holding consultations with agriculture across Canada, with meetings in Ottawa, Calgary, Saskatoon, Winnipeg and other cities. Key issues with the program will be raised during the meetings.

As more meetings are held later this year, we will continue to provide updates.

From oil sands to oil seed: How inter-industry collaboration is good for Canada

Two major Alberta industries — agriculture and oil and gas — are collaborating to generate novel ideas that will benefit the environment and improve sustainability.

The collaboration was triggered by a March 2017 announcement that the federal government would provide up to $950 million in funding under the Innovation Superclusters Initiative.

The “supercluster” concept encourages small, medium and large companies, academic institutions and not-for-profit organizations to come together to generate bold ideas. The potential outcome of these collaborations is more well-paying jobs, groundbreaking research and a world-leading innovation economy.

An agricultural cluster – Smart Agri-Foods Supercluster (SASC) – was formed in response to the federal announcement.

What SASC is working toward

SASC is an open system for collaboration across all sectors of the agri-foods value chain, including agri-foods producers, processors and research, as well as players from outside the traditional agriculture sector.

By providing a venue for these participants to join across diverse fields and from different parts of the country, the SASC is facilitating innovation and research that otherwise might not happen.

Four initial “innovation communities” were established:

  1. Digital Connectivity – intended to develop technologies and tools for today’s (and tomorrow’s) smart farm.
  2. Genetic/Processing – including soil and root intelligence, protein and processing innovations and photosynthetic efficiency.
  3. Sustainable Livestock – to more efficiently and sustainably produce premium meat protein.
  4. Bio Economy and Sustainability – to improve sustainable performance, farm management and trading platforms.

Collaborating with oil and gas

Bill Whitelaw, chair of the SASC steering committee, suggested to the group that the agriculture and oil and gas sectors collaborate on some of their joint challenges. Bill is also president and CEO of JWN Energy and vice-president of Weather Innovations, so his knowledge of both sectors is extensive.

“Agriculture and energy share many of the same environmental and sustainability challenges,” said Bill, “so it makes sense to bring in the oil and gas sector on the basis of air, water and land innovations. As part of that collaboration, we invited Joy Romero, head of the Clean Resource Innovation Network (CRIN) to join the SASC board.”

Why the partnership is the way forward

Bill used water as an example to explain how a collaboration could benefit both industries.

“These are two sectors that use huge amounts of water in their operations and produce huge amounts of waste water. There is an opportunity for the two industries to get together and share innovations or research when it comes to water management or treatment,” he said.

“For instance, technology developed to clean waste water from a fracking operation could be just as effective in a feedlot. Joint solutions could help the sectors to manage their costs and to take a joint view on managing our resources.”

It also gives the industries an opportunity to demonstrate that they are taking these issues seriously and actively developing solutions.

Government funding

Although the SASC was one of nine superclusters shortlisted for funding, they were not among the final five selected.

“But we still exist and all the original companies are still active in the supercluster,” Bill said.

“We have made our home in Olds College and are using their smart farm to create demonstration projects. Potentially, you could see an oil sands company working with an agri-fertilizer company to fund an initiative under the air, water and land banner.”

Agriculture and oil and gas are two core industries in Alberta – and both sectors are working with our key natural resources. The groundbreaking collaboration between these two sectors, and academic and research institutions is an exciting development for the industries themselves and Canadians generally.

We will report on their progress as projects unfold.

Alberta’s agricultural leaders ask government for help with labour crisis

The Agriculture Industry Labour Council of Alberta (AILCA) has written a letter to the federal and provincial governments asking for support, because it is concerned that proposed changes to two programs intended to help farmers with a worker shortage will make it even harder to access labour.

For many years, Canada’s farmers have struggled with a declining domestic labour pool, resulting in a chronic shortage of workers. Temporary foreign workers are often the only source of labour available to help them continue their operations.

The council believes the proposed changes to the Provincial Nominee Program and the Temporary Foreign Worker Program (TFWP) will complicate the use of these labour lifelines.

Who is AILCA?

AILCA is a council of 22 agricultural producers, and related organizations, representing diverse agri-foods sectors from livestock to food crops and greenhouse growers.

The council recently wrote a letter outlining their concerns to the following ministers:

    • Hon. Patricia A. Hajdu, Minister Employment, Workforce Development and Labour
    • Hon. Ahmed Hussen, Minister Immigration, Refugee, and Citizenship Canada
    • Hon. Christina Gray, Minister of Alberta Labour

The purpose of the letter was to outline in detail the reasons for their concern, and the implications for Canadian agriculture if the government fails to take action to protect their interests.

The AILCA message to Ottawa

Here is a summary of the council’s concerns:

THE PROVINCIAL NOMINEE PROGRAM

The federal government is imposing new requirements on the provinces relating to education, income, language and more. These requirements will severely hinder and limit farmers’ ability to transition temporary foreign workers to permanent resident status.

Some of the issues include:

    • Excessively high-income thresholds which are prohibitive for employers. It also does not consider unique aspects of agricultural employment which might include subsidized housing and the comparatively low cost of rural living.
    • Educational requirements which do not take into account work experience or job skills.
    • Language skills that are more advanced than those required to apply for Canadian citizenship.

The government is taking away the ability of provincial governments to provide solutions tailored to their specific economic needs.

THE TEMPORARY FOREIGN WORKER PROGRAM

The Temporary Foreign Worker Program has many administrative issues that make it a lengthy and complex process for companies to acquire permits for the workers they need:

Service delivery issues:

    • Insufficient communication, leading to refusals. Applications are routinely refused on the grounds of rules or regulations that do not exist or have never been made public. Unannounced and sudden changes to forms, program requirements and wage rates are another common reason for refusal.
    • Increasing service delivery timelines and frequent processing delays, mean applications can take anywhere from one to three months, with no consistency.
    • Workers coming from Mexico are experiencing such delays to their visa applications that they often don’t arrive in time for the start of the season.

Program framework issues:

    • TFWP Cap – Despite the proven, chronic agricultural labour shortage, many employers are subject to a 10 or 20-per-cent cap on the number of TFWs they can hire.
    • Housing – Employment and Social Development Canada officers have been implementing excessive housing requirements based on unpublished, and in some cases, non-existent program rules. Many of them fail to consider the specific situation or requirements of individual employers.
    • Application Streams – The application stream under which employers can apply has been reduced from two to one, resulting in many problems because specific operational needs are not taken into account.
    • Commodity Lists – A TFW can only work in one commodity, or agricultural product group. On a feedlot, for instance, this precludes workers from helping with both livestock and feed crops because those would be considered different commodities.

Audits and inspections:

    • Applications are often delayed due to audits, which can drag on for weeks or even months. This leaves employers without access to desperately needed workers or prevents workers from extending their permits.
    • Unannounced inspections are being held, but the processes that guide those inspections have not been made available to employers. Certain issues such as bio-security and the inspection of businesses located in homes and private residences have not been addressed and are of particular concern.  

What AILCA wants

AILCA stresses the need for leadership from within the federal departments of Employment and Social Development Canada, and Immigration and Refugees and Citizenship Canada, as well as from the provincial government.

AILCA would like to see meaningful, ongoing collaboration on these issues, and has asked the provincial and federal governments to engage with producers and processors to develop realistic labour and immigration policies. They stress this is the only way to successfully grow Alberta’s and Canada’s agriculture and agri-food sector.

Secure labour sources needed to meet $75-billion ag-export goal

 

In 2017, the federal government challenged Canada’s agricultural producers to reach an export target of $75 billion by 2025 – fully $20 billion more than current levels. The government has identified agriculture as one of a handful of sectors that could spur economic growth.

Yet the huge potential for increased global trade for Canadian agri-foods is likely to go unfulfilled unless the agriculture sector’s chronic labour crisis is resolved.

Temporary foreign workers

The importance of temporary foreign workers to Canada’s farmers has been explained in previous blog posts. When farmers cannot find enough domestic workers to help them run their operations, access to temporary foreign workers, and the ability to keep them in the country, is crucial to the growth of the sector.

Proposed changes to the Alberta Immigrant Nominee Program and to the Temporary Foreign Worker Program are making it harder for farmers to access that labour lifeline.

Youth unemployment

We spoke with Joe Hersch, managing director of Youth Jobs Canada, who said that young Canadians could also be part of the solution.

“Unemployment rates among youth are in the range of 13 to 14 per cent,” said Joe. “That’s about double the Canadian unemployment rate, which stands at around seven per cent”.

Youth Jobs Canada is the only national employment website that focuses strictly on youth. It makes employment resources available to youth, and helps bridge the divide between them and potential employers. “We wanted to give youth the tools that they need to go after jobs, but also to allow employers to post jobs,” Joe continued.

The response to the site, which launched in October 2017, has been very favourable among employers, but the uptake among youth is growing more slowly. Joe commented that job seekers can sometimes be unrealistic in terms of the level at which they expect to enter a career path.

Youth Jobs Canada is building awareness among young people, primarily through work fairs and social media.

“Social media is where young people live,” said Joe, “and if you can direct your message through social media that’s how you can make sure you’re being seen. Having that interaction is so valuable, so that youth feel comfortable that we’re identifying with what they need.”

Services such as Youth Jobs Canada are valuable tools in the agricultural sector’s recruitment toolkit. Some others include Acme School’s Career Connections, Alberta 4-H, Ag in the Classroom and Alberta Agriculture and Forestry’s Green Certificate Program. Nonetheless, support from the government is the best hope our agricultural producers have of a viable solution to this long-term challenge.